What is an 'Auto Insurance'

An auto insurance is a policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

BREAKING DOWN 'Auto Insurance'

Auto insurance premiums, or the amount policyholders pay to be insured, vary depending on: age, gender, years of driving experience, accident and moving violation history, and other factors. Most states mandate that all vehicle owners purchase a minimum amount of auto insurance, but many people purchase additional insurance to further protect themselves.
A poor driving record or the desire for more complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk, which means increasing your deductible.

RELATED TERMS
  1. Insurance Coverage

    The amount of risk or liability covered for an individual or ...
  2. Standard Auto Insurance

    Auto insurance offered to drivers considered to fall into an ...
  3. Preferred Auto Coverage

    Auto insurance offered to drivers considered to fall into the ...
  4. Private-Passenger Auto Insurance ...

    An estimate of the risk an insurance company will take on by ...
  5. Insurance

    A contract (policy) in which an individual or entity receives ...
  6. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
Related Articles
  1. Insurance

    Beginner's Guide To Auto Insurance

    Find the perfect policy that suits both your coverage and budgetary needs.
  2. Insurance

    4 Types Of Insurance Everyone Needs

    Here are four forms of insurance that are vital to have.
  3. Insurance

    Insurance: A Common Personal Finance Pitfall

    Making decisions about insurance can be challenging. But declining coverage altogether comes with it's own risks, and costs.
  4. Insurance

    What Happens If You Lie on a Car Insurance Application

    The majority lies to save on premiums – but consequences can be severe for not owning up to things like tickets, accidents and how much you drive your car.
  5. Insurance

    How to Find the Right Car Insurance

    Finding the right car insurance can be difficult. However with these strategies, you can get the most for your money, protect your assets and your health.
  6. Insurance

    Cheap Car Insurance For College Students

    6 ways to get the best car insurance quotes during those years when insurance companies rate you as a high-risk customer.
  7. Insurance

    How To Reduce Auto Insurance Costs

    Owners can decrease their costs by following a few simple steps.
  8. Insurance

    4 Types of Insurance Everyone Needs

    Most experts recommend four types of insurance to provide a measure of protection from the unexpected: life, health, auto and long-term disability.
  9. Insurance

    12 Car Insurance Cost-Cutters

    If car costs are dragging you down, find out how to free yourself from some of the extra weight.
  10. Insurance

    4 Types Of Insurance Everyone Needs

    These four types of insurance are the ones most financial experts recommend everyone have.
RELATED FAQS
  1. Can your insurance company drop you after an accident?

    Learn how auto accidents can lead to insurance premium increases or policy cancellations, and why high-risk drivers are more ... Read Answer >>
  2. Who are the best-rated auto insurance companies in the US?

    Learn which U.S. auto insurance companies have the best consumer ratings and who is eligible to purchase auto insurance from ... Read Answer >>
  3. What types of companies are in the automotive sector besides auto manufacturers?

    Explore the relationships between automobile manufacturers and the numerous other types of companies that work in the automotive ... Read Answer >>
  4. How important are seasonal trends in the automotive sector?

    Learn more about the automotive industry, including the strong seasonal sales trends for the industry and some of the major ... Read Answer >>
  5. What impact will growth in the emerging markets have on automotive sector?

    Learn about the automotive industry in emerging market nations and the prospects for growth in the auto industry in these ... Read Answer >>
  6. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
Hot Definitions
  1. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  2. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  3. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  4. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  5. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center